What is the Pension Benefit Guaranty Corporation: The Pension Benefit Guaranty Corporation (PBGC) provides a pension if your company can no longer do so. It is financed via insurance payments made by the companies whose pensions it guarantees. It was mandated by ERISA (Employee Retirement Income Security Act).
What the Pension Benefit Guaranty Corporation Does: PBGC is mandated to guarantee the pension incomes for 44.1 million workers in over 30,000 pension plans. If the companies that have offered these plans can no longer afford to provide them, PBGC steps in.
However, PBGC currently only provides benefits for 683,000 retirees, at a cap of $47,659 per worker. It is doubtful it could afford to pay for two or three times as many retirees, much less the 44 million retirees it guarantees.
How the the Pension Benefit Guaranty Corporation Affects the U.S. Economy: Many experts believe that an unknown number of companies will not be financially capable of funding their pension plans. If too many companies apply for protection from PBGC, it too will not be able to pay the pensions. This will leave millions of retired workers without an income, dependent on Social Security and possibly forced to continue working...if they can.
In August 2006, President Bush signed the Pension Protection Act of 2006, which requires companies to more fully fund their plans.
How the the Pension Benefit Guaranty Corporation Affects You: Find out if you have a pension plan, also known as a defined benefit plan. This is not the same as a 401(K) or IRA. Ask your plan administrator for a copy of the Summary Plan Description to see if it is covered by PBGC. Also ask if the pension is at least 80% funded. Develop a retirement plan that both includes and does not include your pension...just in case it no longer there when you need it.
